Having the Equestrian Games at Cloudsdale would have been a horrible idea. The city is made of clouds, and only pegasi have the ability to walk on clouds, so it would have basically been an all-pegasus event. That wouldn't have been fair to the unicorns and earth ponies.

And no, they couldn't just use the spell Twilight used so she and the non-pegasi members of the Mane Six could walk on clouds, unless they found a unicorn with enough magical talent to put that spell on thousands of unicorns and earth ponies.